I have received numerous inquiries regarding whether the *minimum paid-up capital requirements* for establishing *Universal Banks* and *Development Finance Institutions* are the same. These questions have arisen following the government’s announcement of plans to establish a *Women Development Bank* with a budgetary allocation of GH¢50 million.
I fully support the initiative to establish the *Women Development Bank* and sincerely hope that the government implements it effectively, in line with the expectations of many Ghanaians.
For the purpose of public education and clarification, I am providing the following insights into the *minimum paid-up capital requirements* for the establishment of *Universal Banks and Development Finance Institutions*.
*1. Minimum Capital Requirement for Universal Banks*
In accordance with *Section 28 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930),* the *Bank of Ghana* revised the minimum paid-up capital for both existing banks and new entrants. Effective *11th September 2017*, the capital requirement increased from *GH¢120 million* to *GH¢400 million*, as specified in *NOTICE NO. BG/GOV/SEC/2017/19*.
*2. Minimum Capital Requirement for Development Finance Institutions*
On *18th March 2021*, the *Bank of Ghana* issued a directive on *Licensing and Capital Requirements for Development Finance Institutions (DFIs)*, pursuant to the *Development Finance Institutions Act, 2020 (Act 1032)*. This directive, contained in *NOTICE NO. BG/GOV/SEC/2021/04*, categorises DFIs into four (4) main classes, each with specific capital requirements:
*Minimum Paid-Up Capital and Application Processing Fees:*
1) *Class 1*– *Wholesale Development Finance Institution:* GH¢800 million.
2) *Class 2* – *Retail Development Finance Institution:* GH¢600 million.
3) *Class 3* – *Guarantee Development Finance Institution:* GH¢300 million.
4) *Class 4* – *Hybrid Development Finance Institutions* (depending on the combination of activities undertaken):
– *Class 4a* (Wholesale, Retail & Guarantee): GH¢1.2 billion.
– *Class 4b* (Wholesale & Retail): GH¢1 billion.
– *Class 4c* (Wholesale & Guarantee): GH¢1 billion.
– *Class 4d* (Retail & Guarantee): GH¢800 million.
It is important to emphasise that, according to the notice, *no pre-operating permit will be granted unless the applicant meets the required paid-up capital threshold, and the original sources of capital are deemed acceptable*.
*3. The GH¢50 Million Allocation for the Women Development Bank*
Given these statutory requirements, it is important to critically assess the government’s proposed *GH¢50 million allocation* for the establishment of the *Women Development Bank*.
Is this allocation intended for:
– A *Universal Bank*?
– A *Development Bank*?
– A *Savings and Loans Company*?
– A *Microfinance Institution*?
Clarity on this matter would be beneficial to ensure the initiative aligns with existing regulatory frameworks.
God bless you all, and have a blissful weekend
The Author, Dr Gideon Boako is the MP, for Tano North Constituency